Philip Hammond warned that if an MoD inquiry found the senior figures had abused the access that came with their previous high rank then it could be “shut down”.
Labour has demanded “full disclosure” of any dealings between those caught by the Sunday Times sting and Ministers, personnel and officials dealing with defence contracts. The future of one senior figure as the figurehead of the Royal British Legion is under review by the charity after he was alleged to have told reporters his role could help bypass restrictions.
Mr Hammond said the revelations were “deeply damaging to the individuals concerned and their reputations” but insisted there was “no way that retired officers influence the way that military equipment is procured”. Rules appeared to have been broken, however, and could need a tougher enforcement, he added.
The generals were filmed in talks with reporters posing as representatives of a South Korean weapons manufacturer seeking to recruit them to help sell “drone” aircraft to the Government.
Among those targeted were Lieutenant General Sir John Kiszely, ex-head of the Defence Academy and now president of the Royal British Legion, former MoD procurement chief Lieutenant General Richard Applegate, Admiral Sir Trevor Soar, commander-in-chief fleet of the Royal Navy until earlier this year, and ex-head of the Army Lord Dannatt.
All deny breaking any rules, the newspaper said, and insist they had the best interests of the military at heart.
The Royal British Legion said it had begun a high-level internal investigation into whether Sir John, a decorated Falklands hero, had abused his position within the charity.
Sir John is alleged to have said he could push the fake firm’s interests to figures like the Prime Minister in a private box at the Festival of Remembrance next month. At other events he would find himself “standing there waiting for the Queen with nothing else to talk about to Philip Hammond than whatever”, he is recorded as telling the reporters.
As the Legion’s representative he could also easily fix meetings with Armed Forces Minister Andrew Robathan that could otherwise be refused, where commercial issues could then be raised in conversation.
The newspaper claimed both he and Lt Gen Applegate said they lobbied on deals while they were in the “purdah” period.
Lord Dannatt said he could speak to the MoD’s top civil servant, a former school friend, it said.
Sir Trevor is reported to have said he could simply “ignore” the two-year ban imposed by the Advisory Committee on Business Appointments because the enforcement system was ineffective.
Mr Hammond said: “There are many, many reasons why it is sensible for the MoD to maintain contact with retired officers. They are often asked (by the media) to comment on things that are going on in the defence area. But if they are abusing that access for commercial purposes then we will have to tighten it up or maybe even shut it down. That is something we will now look at.”
Like in a string of other undercover “cash for access” stings to hit Westminster in recent years, people were “rather bigging up their capabilities” and showing “bravado” to impress.
An MoD spokesman said: “As Minister for Personnel, Welfare and Veterans, Andrew Robathan never discussed equipment with John Kiszley, and has not met him since being appointed as Minister for the Armed Forces.”